question 3

Due to erratic sales of its sole product-a high-capacity battery for laptop computers--PEM, Inc., has been experiencing financial difficulty for some time. The company's contribution format income statement for the most recent month is given below: Sales (13,300 units * $20 per unit) Variable expenses Contribution margin Pixed expenses Net operating loss 159,600 106,400 119.400 $ (12,000) Required: 1. Compute the company's CM ratio and its break-even point in unit sales and dollar sales. 2. The president believes that a $6,100 increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $86,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the company's monthly net operating income? 3. Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an increase of $39,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (oss)? 4. Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would grow sales. The new package would increase packaging costs by $0.80 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,100? 5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $60,000 each month. a. Compute the new CM ratio and the new break-even point in unit sales and dollar sales. b. Assume that the company expects to sell 20.200 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.) c. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,200)? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg3 Reg4 Reg SA Reg 5B Reg SC Compute the company's CM ratio and its break-even point in unit sales and dollar sales. (Do not round intermediate calculations. Round "CM ratio" to the nearest whole percentage (i.e., 0.234 should be entered as "23").) % Reg 1 Reg 2 Reg 3 Reg 4 Reg SA Req 5B Reg 5C The president believes that a $6,100 Increase in the monthly advertising budget, combined with an intensified effort by the sales staff, will result in an $86,000 increase in monthly sales. If the president is right, what will be the increase (decrease) in the company's monthly net operating income? (Do not round intermediate calculations.) Reg 1 Reg 1 Reg 2 Req2 R ei3 Reg4 Req 5A Req SB Reg 5C Refer to the original data. The sales manager is convinced that a 10% reduction in the selling price, combined with an Increase of $39,000 in the monthly advertising budget, will double unit sales. If the sales manager is right, what will be the revised net operating income (loss)? (Losses should be entered as a negative value.) Revised net operating income (loss) Reg 1 Req 2 Reg 3 Reg 4 Reg 5A Req 5B Reg 5C Refer to the original data. The Marketing Department thinks that a fancy new package for the laptop computer battery would grow sales. The new package would increase packaging costs by $0.80 per unit. Assuming no other changes, how many units would have to be sold each month to attain a target profit of $4,100? (Do not round intermediate calculations. Round final answer to the nearest whole unit.) Show less Unit sales to attain target profit Reg 1 Reg 2 Req3 Reg 4 Reqs Reg 58 Req 5C Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $60,000 each month. Compute the new CM ratio and the new break-even point in unit sales and dollar sales. (Do not round intermediate calculations. Round "CM ratio to the nearest whole percentage (i.e., 0.234 should be entered as "23") and other answers to the nearest whole number.) Show less CM ratio Reg 1 Reg 2 Reg 3 Req 4 Req 5A Reg 58 Req SC Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $60,000 each month. Assume that the company expects to sell 20.200 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis as well as in total, for each alternative.) (Do not round your intermediate calculations. Round your percentage answers to the nearest whole number.) Show less PEM, Inc. Contribution Income Statement Not Automated Total Per Unit Automated Total Per Unit R1% Rea Reg 1 Reg 2 Reaz Req3 Req3 Reg 4 Rega ReqSA Req 5A Rease Reg 5B Req 5C Rease | Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $60,000 each month. Would you recommend that the company automate its operations (Assuming that the company expects to sell 20,200)